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Stock markets in the United States have been under pressure as inflation rose faster than expected in August 2022. According to the US Department of Labor, the Consumer Price Index (CPI) increased by 0.1% in August, compared to a consensus forecast of a 0.1% decrease. This strengthens the case for the Federal Reserve to raise the benchmark interest rate by 0.75% at its meeting next week. The increase in inflation comes at a time when supply chain challenges are easing around the world as a result of the relaxation of COVID-19-related lockdowns. Meanwhile, the labor market’s resilience, combined with the robust wage increase, indicates that inflation has not yet peaked. This will only encourage the Federal Reserve to take a more aggressive stance in order to reduce inflation and return it to its 2% year-on-year target. The CPI increased by 8.3% year on year in August. This means that the 12-month CPI has been higher than 8% for the past six months.
Political Consequences
This is a troubling sign not only for the Federal Reserve, but also for the Biden administration and Democratic Party candidates running in the November 8 midterm elections. Observers believe that raging inflation will shift power to the Republican side of the House of Representatives. President Biden has stated that lowering inflation will take more time and determination. The Biden Administration recently passed the Inflation Reduction Act (IRA), which aims to reduce the cost of energy, healthcare, and prescription medications, easing the burden on the average American. According to some experts, the Federal Reserve and the US government are falling behind in controlling inflation and cooling the economy by taking the necessary measures. However, it should be noted that the Federal Reserve has already raised benchmark interest rates by 0.75% each in June and July, bringing the rate from near zero percent in March 2022 to a current range of 2.25% to 2.5%.
The labor market, on the other hand, is showing resilience. According to data released last week, the number of people applying for unemployment benefits has reached a three-month low. In August, there were two job openings for every unemployed person. These circumstances reflect a strong job market, which is allowing employees to keep their bargaining power and demand higher wages. Wage-spiral inflation is exacerbating inflationary pressures.
The higher-than-expected CPI also triggered a broader sell-off on September 13, with many stocks setting new 52-week lows. NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:META) all suffered losses. Previously, the markets had closed in the green for four straight sessions. The sell-off presents an appealing opportunity for investors to go long in stocks with strong fundamentals and a positive outlook.
Our Procedures
We have shortlisted ten solid stocks that are trading within 5% of their 52-week low and offer shareholders attractive upside potential. As of September 15, we had chosen small-cap stocks with market capitalizations ranging from $300 million to $2 billion. The companies’ growth prospects and analyst ratings have been discussed. As of Q2 2022, these stocks were ranked from lowest to highest in terms of hedge fund ownership.
Best Low-Cap 52-Week Stocks to Buy Right Now
10. Celularity, Inc. (NASDAQ:CELU)
Celularity Inc. (NASDAQ:CELU) is a Florham Park, New Jersey-based firm developing a novel approach to cell therapy. Multiple cell therapy candidates are in clinical and pre-clinical development at the company. Celularity Inc. (NASDAQ:CELU) was founded in 2016 as a spin-off from Celgene’s Cell Therapeutics Department.
In a note issued to investors on August 25, James Molloy of Alliance Global Partners initiated coverage on Celularity Inc. (NASDAQ:CELU) stock with a target price of $15 and a Buy rating. Celularity Inc. (NASDAQ:CELU) has a “deep pipeline” of placenta-derived allogeneic therapies for cancer, infectious and immune-related diseases, according to the analyst.
Concerns about the company’s cash position have caused Celularity Inc.’s (NASDAQ:CELU) stock price to fall to a 52-week low following the company’s Q2 2022 results. Observers believe that the data expected to be released in the second half of the year will provide insight into the growth potential of Celularity Inc.’s (NASDAQ:CELU) platform, which will boost the stock price.
9. Amneal Pharmaceuticals, Inc. (NYSE:AMRX)
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Amneal Pharmaceuticals, Inc. (NYSE:AMRX) is a generic and specialty pharmaceutical product manufacturer based in Bridgewater Township, New Jersey. Over 250 generic medicines are in the company’s portfolio.
Amneal Pharmaceuticals, Inc. (NYSE:AMRX) submitted a new drug application (NDA) for IPX 203 to the Food and Drug Administration (FDA) in the United States on August 31. The drug is used to control the highly damaging Parkinson’s disease by releasing carbidopa/levodopa (CD/LD) for an extended period of time. Amneal Pharmaceuticals, Inc. (NYSE:AMRX) issued the NDA based on Phase 3 data that showed better results than immediate release CD/LD.
Prior to the broad market sell-off, Amneal Pharmaceuticals, Inc. (NYSE:AMRX) stock experienced an overdone sell-off following a report highlighting that numerous generic manufacturing companies settled their case related to the alleged claims that Zantac was contaminated with nitrosodimethylamine (NDMA). Analysts are still optimistic about Amneal Pharmaceuticals, Inc. (NYSE:AMRXlong-term )’s prospects because the company has a diverse product portfolio.
8. The Latham Group, Inc. (NASDAQ:SWIM)
Latham Group, Inc. (NASDAQ:SWIM) is a leading North American designer, manufacturer, and marketer of in-ground residential swimming pools. The company ranks eighth on our list of the ten best 52-week low small-cap stocks to buy right now.
Keith Hughes of Truist gave Latham Group, Inc. (NASDAQ:SWIM) stock a target price of $10 and reiterated a Buy rating in a research note issued on August 10. According to the analyst, the company reported mixed results for the second quarter of 2022 and had to reduce revenue and EBITDA guidance for 2022 due to macroeconomic uncertainty and the expectation of softer demand due to the weather forecast not supporting the pool season.
However, experts believe that Latham Group, Inc. (NASDAQ:SWIM) is undervalued and has significant growth potential. Despite the difficult economic conditions, Latham Group, Inc. (NASDAQ:SWIM) demonstrated strong operational resilience in the second quarter. The company increased its North American fiberglass production levels while also shortening lead times. Analysts anticipate that the company will quickly recover from its temporary setbacks.
Latham Group, Inc. (NASDAQ:SWIM) was mentioned in Baron Funds’ Q3 2021 investor letter. According to the investment management firm:
“After a strong initial share price performance following its April IPO, Latham Group, Inc., the world’s largest manufacturer of fabricated pools, reversed course and declined sharply in the most recent quarter following disappointing quarterly results and the announcement of the departure of a key employee.” We sold the Fund’s stake in the company.”
7. Smith and Wesson Brands, Inc. (NASDAQ:SWBI)
Smith & Wesson Brands, Inc. (NASDAQ:SWBI) is a firearm manufacturer based in Springfield, Massachusetts. The company is regarded as a market leader in the manufacture of pistols, revolvers, rifles, and shooting accessories.
Mark Smith of Lake Street assigned Smith & Wesson Brands, Inc. (NASDAQ:SWBI) stock a target price of $22 and maintained a Buy rating in a research note issued to investors on September 9. Although the company reported mixed Q1 FY23 results due to demand normalization and seasonal weakness, the analyst believes that by pursuing a disciplined approach, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) stock still offers long-term growth potential. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) could easily have overloaded its inventory channels, boosting current quarterly results, but chose not to do so in order to maintain its focus on long-term goals.
Experts believe the company has reached its revenue and margin bottom during the first quarter of FY23. As a result, investors can anticipate a significant improvement in margins in the future. Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has a forward P/E ratio of 6.8x, which is significantly lower than the 5-year historical forward P/E of 11.61x. Furthermore, as of September 15, Smith & Wesson Brands, Inc. (NASDAQ:SWBI) has a forward dividend yield of 3.44%. The company’s solid business fundamentals place it among the top ten 52-week low small-cap stocks to buy right now.
6. Organogenesis Holdings Inc. (NASDAQ:ORGO)
Organogenesis Holdings Inc. (NASDAQ:ORGO) is a regenerative medicine company based in Canton, Massachusetts that focuses on developing products for advanced wound care and meeting the needs of the surgical and sports medicine markets.
Organogenesis Holdings Inc. (NASDAQ:ORGO) received FDA 510k clearance for its wound healing product PuraPly MZ on August 15. The product will offer a way to help heal complex wounds. Organogenesis Holdings Inc. (NASDAQ:ORGO) is a profitable company that is expanding its product line. Analysts predict that the company will end 2022 with revenue and earnings per share of $476.86 million and 22 cents, respectively. The revenue forecast assumes 1.88% year-on-year growth, which is expected to accelerate to 8.06% in 2023 for annual revenue of $515.28 million and EPS of 31 cents. This equates to a forward P/E multiple of 11.45x.
During the second quarter of 2022, Soleus Capital increased its holdings in Organogenesis Holdings Inc. (NASDAQ:ORGO) by 109%.
In addition to Organogenesis Holdings Inc. (NASDAQ:ORGO), notable big-cap stocks such as NVIDIA Corporation (NASDAQ:NVDA), Alphabet Inc. (NASDAQ:GOOG), and Meta Platforms, Inc. (NASDAQ:META) saw significant declines in stock prices during the recent market sell-off on September 13.
5. Holley Inc. (NYSE:HLLY)
Holley Inc. (NYSE:HLLY) is an automotive performance company founded in 1896 in Bowling Green, Kentucky. Through its market-leading electronic fuel injection (EFI) products, the company specializes in advanced fuel-system designs.
In a research note to investors dated August 12, Michael Swartz at Truist set a $10 price target and reiterated a Buy rating on Holley Inc. (NYSE:HLLY) stock. The target price assumes a potential gain of over 75% from the 15 September closing price. The analyst concurred that the company’s second quarter results in 2022 were “not pretty.” However, Holley Inc.’s (NYSE:HLLY) difficulties over the past three months were temporary and should not have an effect on the company’s long-term outlook. Long-term investors are encouraged by the analyst’s bullish stance on Holley Inc. (NYSE:HLLY) stock.
Wasatch Global Investors stated the following regarding Holley Inc. (NYSE:HLLY) in its Q2 2022 investor letter:
“Another contributor was Holley, Inc., which designs, manufactures, and sells high-performance car and truck parts. The company’s loyal customer base, healthy margins, and specialized product offerings have enabled it to pass along higher costs and better withstand the effects of inflation, particularly in comparison to other companies that lack the same pricing power. Investors reacted favorably to Holley’s most recent round of acquisitions, which are anticipated to facilitate the company’s entry into new and sizable strategic markets. The most recent earnings report for Holley confirmed the company’s organic growth profile, bolstering confidence in the company’s future prospects. Holley is a former special-purpose acquisition company (SPAC), and there have been general concerns regarding SPACs because they typically issue warrants (options to purchase stock at a fixed price) that can subsequently dilute shareholder ownership. Whenever we invest in a former SPAC, we incorporate the possibility of dilution into our analysis. Regarding Holley in particular, we maintained our optimistic outlook for the company last year, and it paid off in the first quarter of 2022.”
At the end of the second quarter of 2022, 15 hedge funds reported ownership of Holley Inc. (NYSE:HLLY) shares.
4. Hillman Solutions Corporation (NASDAQ:HLMN)
Hillman Solutions Corporation (NASDAQ:HLMN) is a Cincinnati-based provider of simple hardware solutions that serves the complex needs of its customers at 42,000 locations in the United States.
The analysts anticipated that Hillman Solutions Corp.’s (NASDAQ:HLMN) financial guidance for Q3 2022 and the full year 2022 would be lowered during the Q2 2022 earnings season to reflect the potential weakness observed in the home building and building product segment. In contrast to the consensus estimate of $1.5 billion, Hillman Solutions Corp. (NASDAQ:HLMN) maintained its 2022 revenue guidance in the range of $1.5 billion to $1.6 billion when the company reported its Q2 2022 results on August 3. In addition, the firm maintained its free cash flow (FCF) guidance range of $120 million to $130 million. In the coming years, Hillman Solutions Corp. (NASDAQ:HLMN) is expected to gain greater market share as it expands its product line.
In its Q4 2021 investor letter, ClearBridge Investments expressed its bullish outlook on Hillman Solutions Corp. (NASDAQ:HLMN). Here’s what the company stated:
The market is a voting machine in the short term, but a weighing machine in the long term, according to Ben Graham’s alleged assessment. In 2021, we observed votes cast against companies based solely on how and when they raised capital, as if the choice of financing vehicle supersedes the underlying business’s long-term value creation. The Class of 2021 Initial Public Offerings and companies that raised capital by merging with Special-Purpose Acquisition Companies (SPACs) were two such areas that hindered the performance of the Strategy. As the “weighting machine” resumes operation, we anticipate that the value of each of the businesses underlying these holdings will be reflected over time. Of course, many IPOs and SPAC acquisitions involved immature businesses — often merely concepts — that shouldn’t be public, but with so many deals completed, there are bound to be a few gems.
Midway through 2021, Hillman Solutions completed the process of merging with Landcadia Holdings III (a SPAC). Hillman is a distributor of hardware and provider of automation tools (such as key making and knife sharpening) to U.S. retailers. In the short term, supply chain issues have impacted the business, while bearish investors appear to be focused on the treatment of warrants related to SPACs. Given the quality and labor alternatives offered by its services, Hillman is well-positioned to continue expanding over the long term. Despite a recent decline, Hillman’s fill rates (i.e., in-stock inventory) remain the highest in the industry, which should result in gains in market share and the possible entry into additional product categories. Hillman’s business model, which entails taking over inventory, distribution, and floor staffing, as well as automated self-service kiosks, helps to alleviate one of the most significant pressure points in its customers’ businesses: labor. In contrast, the future growth and profitability expectations reflected in Hillman’s current stock price are extremely modest relative to the company’s potential.
3. Cerus (NASDAQ:CERS)
Cerus Corporation (NASDAQ:CERS) is a biotechnology company based in Concord, California that develops and distributes pathogen-protected blood components to blood centers and hospitals.
The Intercept Blood System for platelets and plasma from Cerus Corporation (NASDAQ:CERS) is the only pathogen reduction system with FDA approval and a CE mark indicating conformity to European health and safety standards. Cerus Corporation (NASDAQ:CERS) and the American Red Cross have agreed to a five-year extension for the Intercept System. The American Red Cross provides nearly 40 percent of the nation’s blood supply. In addition, the company has an agreement with Fresenius Kabi to produce Intercept Kits for the next ten years. The company’s promising future prospects justify its inclusion on our list of the ten best small-cap stocks with 52-week lows to buy now.
During the second quarter of 2022, the leading hedge fund investor in Cerus Corporation (NASDAQ:CERS) was Baker Bros. Advisors.
2. Wheels Up Experience, Inc. (NYSE:UP)
Wheels Up Experience Inc. (NYSE:UP) is a New York-based provider of private aviation services that offers private flights on demand with all the necessary amenities. The company operates more than 200 aircraft and provides access to more than 1,200 aircraft owned by third parties.
Experts believe that Wheels Up Experience Inc. (NYSE:UP) serves a mature end market with high growth potential. Goldman Sachs has also taken a bullish stance on Wheels Up Experience Inc. (NYSE:UP), citing the company’s significant long-term growth catalysts. Nonetheless, the investment firm noted that the private aviation services market is fragmented and requires a model of asset efficiency. The current share price of Wheels Up Experience Inc. (NYSE:UP) represents an attractive entry point for potential long-term investors.
During the month of August, Wheels Up Experience Inc. (NYSE:UP) introduced a number of future-oriented initiatives. The company’s regulated fleet is managed via a centralized dashboard on the UP FMS platform. It is anticipated that this will improve the management of daily tasks and crew scheduling.
1. The Hain Celestial Group, Inc. (NASDAQ:HAIN)
The Hain Celestial Group, Inc. (NASDAQ:HAIN) is a 1957-founded New York-based manufacturer of natural and organic food products.
In a research note dated 26 August, Anthony Vendetti from Maxim set a $42 price target on shares of The Hain Celestial Group, Inc. (NASDAQ:HAIN), along with a Buy rating. The target price assumes a potential upside of over 123% from the 15 September closing price. Despite the price increase, the analyst noted that The Hain Celestial Group, Inc.’s (NASDAQ:HAIN) penetration of growing brands increased by 5% year-over-year during the fourth quarter of fiscal year 22. These brands are responsible for 80% of the North American business’s volume and profits. The analyst determined that this was a favorable development for the company.
As of the second quarter of 2022, 25 elite funds reported ownership of The Hain Celestial Group, Inc. (NASDAQ:HAIN).
